Do Tax Cuts Pay For Themselves? No

President Bush is slated to sign the $70 billion tax reconciliation bill tomorrow, and this provides as good an opportunity as any to disprove a myth that unfortunately has been floating around the anti-tax ranks for some time now: that tax cuts pay for themselves, or even come close to doing so. In this superb Washington Post article, Sebastian Mallaby gives a rundown of a list -- too long a list -- of administrative and Congressional GOP leaders who have, at one point or another, uttered the absolutely false statement that tax cuts pay for themselves. Instead, as he points out, this "free-lunch mantra is just plain wrong." The economic growth from tax cuts, can, in the most optimistic of economic assumptions, replace some of the revenue losses, but definitely not all. And they certainly cannot, as Majority Leader Bill Frist (R-TN) has so confidently stated, "result in more money for the government." Cutting off revenue streams cannot logically result in more money for the government. They can boost investment, and boost personal savings rate, but cutting taxes cannot add more money to federal coffers. As Mallaby suggests, lawmakers should start paying attention to economists, because "having the world's best economics research isn't particularly helpful if those same politicians are silly enough to tune it out."
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